AML compliance: what anti-money laundering compliance means for a financial institution

AML compliance is how a financial institution follows the anti-money laundering laws that apply to it. In the United States the main law is the Bank Secrecy Act, which FinCEN says authorizes the Department of the Treasury to impose reporting and other requirements on financial institutions and other businesses. Among other things, FinCEN says the regulations require financial institutions to keep records of cash purchases of negotiable instruments, file reports of cash transactions exceeding $10,000 (daily aggregate amount), and report suspicious activity that might signify money laundering, tax evasion, or other criminal activities. Which duties apply to you depends on the kind of institution you are, so confirm the details with your compliance counsel and your regulator.

Banks have a specific AML program rule. Under 31 CFR 1020.210, a bank that implements and maintains an AML program meeting that section is deemed to satisfy 31 U.S.C. 5318(h)(1). For banks, the program must include at a minimum: a system of internal controls to assure ongoing compliance; independent testing for compliance, done by bank personnel or an outside party; a designated individual or individuals who coordinate and monitor day-to-day compliance; training for appropriate personnel; and risk-based procedures for ongoing customer due diligence, meaning understanding the nature and purpose of customer relationships to build a customer risk profile, and ongoing monitoring to identify and report suspicious transactions. Customer information includes beneficial owner information for legal entity customers. A bank must also follow its own Federal functional regulator's rules. Other institution types have their own rules, so ask your counsel.